The telco has applied to the Independent Television Commission (ITC) for a licence permitting it to provide video and other programming directly to its customers. It hopes to stream the content over its ADSL network. Around 60 percent of the population currently has access to ADSL, but only 90,000 end users have subscribed so far.

If BT is successful, then it would be in a much more powerful position to compete with cable companies such as ntl and Telewest, which already offer both high-speed Internet access and television packages.

A ban that preventing BT from bundling television services with its telecoms package was lifted earlier this year. The ITC is expected to give its answer within a few weeks.

A BT spokesman told ZDNet UK News that, "This is something we want to do, because we can do it now." He explained that the infrastructure wasn't currently in place. "We're no plans to take on the likes of Sky and the BBC. However, we do have a database of 21 million customers, which isn't something many other companies can boast," he added.

BT recently appointed Sir Christopher Bland, former chairman of the BBC, as its chairman. This led to speculation that the telco might be planning to transform itself into a broadcaster.

The ITC was not immediately available to comment.

ADSL is already used to stream video to customers. HomeChoice uses high-speed Internet connections to provide television -- including video-on-demand -- to its customers, who pay between £6 and £18 per month, depending on the package they choose.

For a telco such as BT, streaming media makes a great deal of sense. Speaking at the Streaming Media conference in London last week, Microsoft's business development manager for digital media Eric Huggers, said streaming media on a large scale is only really viable over the last mile of a network.

"We draw a distinction between the open Internet and the last half mile," said Huggers. "Over the open Internet, the price for streaming media is outrageous, and the business fundamentals are upside down." The problem is, he said, that the people who sell the bandwidth for streaming media are not usually the people who own the networks. These people have to buy the connections from the pipe operators, and whatever they pay for that they have to charge slightly more to their customers. "As your reach increases, there should be less cost per head on your network, but in this model every head adds to the cost -- there are no economies of scale."

But, said Huggers, there are big opportunities for telcos and cable operators who own the last half mile. "If you are a local exchange carrier, or an incumbent such as BT, you can offer a streaming media service from the exchange because it does not come from some server somewhere in the world, but from your servers around the corner." This, contends Huggers, is the only way to make large-scale streaming media for the masses pay.

BT is not the first telco to take advantage of its position at the local exchanges, and several software already offer Streaming media solutions for last-mile operators. Danish company StreamBuster is working with three Scandinavian telcos to offer video on demand over the Internet. Streambuster version II offers streamed and downloadable video programming including on-demand, full-length films and time-shifting services, which let viewers pause, rewind and fast forward live broadcasts.

ZDNet UK's Matt Loney contributed to this report.

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